Largest US rail union intends to oppose Union Pacific's buy of Norfolk Southern

By Jody Godoy and Lisa Baertlein

July 29 (Reuters) - The largest rail union in the United States said on Tuesday it intends to oppose Union Pacific's UNP.N proposed $85 billion acquisition of smaller rival Norfolk Southern NSC.N in regulatory proceedings, citing concerns about how the largest-ever buyout in the sector will affect U.S. workers and infrastructure.

At the same time, other interested parties - from soybean farmers to retailers and the Port of Los Angeles - see potential harm from rising shipping costs as well as the potential benefit of speedier, seamless service if regulators allow the companies to create the nation's first railroad stretching from the Atlantic to the Pacific.

The transportation division of SMART, the International Association of Sheet Metal, Air, Rail and Transportation Workers, said it plans to oppose the merger when it comes before the Surface Transportation Board for review. SMART represents 230,000 members across several sectors including transportation, construction, and manufacturing.

"We approach this development with measured skepticism rooted in the real-world impact such consolidation could have on rail workers, safety, service quality, and the long-term health of the freight rail industry," the union said in a statement.

Union Pacific and Norfolk Southern said in announcing the deal that they intend to preserve union jobs and aim to be the safest railroad in the country.

The deal, announced earlier on Tuesday, drew mixed reactions from Republicans in Congress.

U.S. Senator Josh Hawley, a Republican from Missouri, said he was concerned.

“I don’t know enough to know, but if they’re concerned, I’m concerned,” Hawley told Reuters, referring to SMART, which endorsed him for reelection in 2024, citing his support for rail safety.

“It's going to be a great deal for America, it’s going to be a great deal for Nebraska,” Senator Pete Ricketts, a Republican from Nebraska, where Union Pacific is based, told Reuters.

Union Pacific shares were down 3.3% at $221.64 on Tuesday afternoon, while Norfolk Southern shares were down 3.4% at $276.97.

If approved, the deal would create the country's first coast-to-coast freight rail operator, combining Union Pacific's stronghold in the western two-thirds of the United States with Norfolk's 19,500-mile (31,382 km) network that primarily spans 22 Eastern states.

Union Pacific has had the most accidents, injuries, and fatalities in the industry in recent years, and has shown a willingness to lay off workers including engineers and conductors even during periods of stability, SMART's Transportation Division said. The union also raised concern that Union Pacific's practice of leasing out its infrastructure could affect service quality.

Union Pacific spokesperson Kristen South said the railroad is the safest in the industry when it comes to personal injuries for the first five months of 2025 and has improved 30% on its derailment rate year to date.

The labor union said the deal could lead to a duopoly in U.S. rail. Competitors BNSF, owned by Berkshire Hathaway BRKa.N, and CSX CSX.O are exploring merger options, Reuters has reported.

"Both history and logic suggest this would drive higher rates, fewer service options, and diminished competition. Shippers and communities deserve more than a monopoly in disguise," SMART said.

MIXED BAG FOR SHIPPING

U.S. railroads have merged from thousands in the late 1800s to just a few players today.

A merger of this scale would be a landmark moment for U.S. supply chains, as the resulting railroad would account for almost half of all containerized rail traffic in the country, said Jess Dankert, the Retail Industry Leaders Association's vice president of supply chain.

"There are two elements to be watched closely: the promise of greater efficiency but also the risk of increased costs," Dankert said.

"A lot of the consolidation that has occurred in the rail industry has resulted, at times, in higher rail rates and a decrease in service," said Mike Steenhoek, executive director of the Soy Transportation Coalition.

"We want people competing for our business, that's good for us," Steenhoek said.

At the busiest U.S. seaport in Los Angeles, about 25% of cargo enters or leaves the docks via rail - work that is split roughly equally between Union Pacific and Berkshire Hathaway-owned BNSF, said Gene Seroka, the port's executive director.

Seroka supports the proposed merger, saying it has the potential to create a seamless service that could reduce costs and improve service, in part by reducing the number of times a rail car is handed off to a new train operator. Quick cargo clearance means the port can process more cargo.

When it comes to supply chains, minimizing cargo hand-offs that add time and potential complications is vital.

"It doesn't like to be passed around like a baton in a relay race," Steenhoek said.